Turning price into a lever for competitiveness and profitability requires a clear and structured vision. Pricing automation makes it possible to shift from a reactive approach to a proactive strategy.
Which competitors should you monitor first? Which factors should you include in your calculations? What rules should you apply to protect your margins while remaining attractive?
Price setting is the operational outcome of your strategy. Pricing inconsistencies or a lack of responsiveness can be very costly and damage your price image in the long run. To avoid these pitfalls, you can now automate price setting with a pricing solution.
In this article, we explore the 5 reasons to consider automating price calculation, but also the safeguards to apply to keep control of your pricing strategy.
Save time to focus on higher value-added tasks
A pricing strategy is based on incoming data which is, by nature, variable: purchase price, competitor prices, level of demand, seasonality, etc.
Therefore, you must continually recalculate your prices based on changes in these variables. You can choose to do this manually or with Excel tables. But, in this case, the task is time-consuming, tedious and the risk of error increases.
By automating pricing, you can focus on tasks that provide greater added value:
- Define an effective strategy
- Ensure the relevance and quality of input data upstream
- Control output price recommendations
If we dig a little deeper, this means that:
- The tool does not replace the strategy. It is its operational arm. It may sound obvious, but it’s always worth stating.
- For price calculation to be as fair as possible, you must ensure the reliability of the input data. The configuration phase with the solution editor is largely used for this.
- Automating is good, but not blindly. Make sure you have control mechanisms to challenge the recommendations of your solution.
However, once you’ve established a strategy that works for you, it would be a shame to have to recalculate your prices every day. An automation solution automatically calculates your prices based on up-to-date incoming data and the strategy rules you have. fixed.
You save your pricers 3 to 5 hours of work every week. All that’s left for you is to control and validate the prices. Your teams can then focus on analyzing predictive results.
You can automate certain checks, such as exceeding the SRP or ensuring range consistency. But imagine you have a strategy of aligning with a competitor. If that competitor makes an abnormal price change, then without proper controls your prices would also become abnormal. That’s why it is essential to set up blocks and alerts, and to carry out a human review of prices to make sure everything remains consistent.
Teams that have used a pricing software like XPA – Optimix Pricing Analytics have reported a 50% increase in productivity.
Minimize the risk of errors
Manual pricing via Excel has had its day.
Nowadays, pricers have to change their item prices more regularly, and pricing strategies have become more refined. The available and actionable input data has become more numerous.
To keep up with changes in the profession, automation is gaining ground. As we’ve seen, it gives pricers more time to focus on strategy. Another advantage: it also reduces the risk of errors.
In an automated solution, the data that goes into price calculations is controlled, made reliable and homogenized. They can be used in real time in price calculation algorithms. You avoid the risk of corrupted files or incorrect data due to incorrect entry or incorrectly entered formulas.
Once you enter your strategy into the tool, the calculations are correct. If the results are inconsistent, it is likely that the input data is “outlier,” for example if you are aligning with a competitor who has set outrageous prices. Hence the interest in having verification mechanisms and alerts at all levels.
If this topic speaks to you, you may also find our article on Excel vs. Pricing Software interesting.
Streamline and harmonize internal pricing management
Very often, when pricers have to calculate their prices manually, everyone is focused on their category or part of the job. The time spent on setting prices is less time to allocate to team discussions on defining the overall strategy and analyzing performance.
Automation strengthens collaboration on pricing. You can roll out your strategy globally across all products and stores. The teams involved can see the results, and you benefit from a shared foundation for discussion.
Since the strategies are harmonized, you also ensure more consistency. The validation process is also better defined since all stakeholders have access to the results at the same time and can react and communicate immediately.
Adopting a price automation solution is therefore an opportunity to gain structure and methodology. Central pricing teams can collaborate more easily, and handovers become smoother in case of absence or staff turnover. Collaboration with in-store teams also becomes more seamless. For example, department managers know exactly when they will receive their new prices and can prepare accordingly.
On an operational level, automation also frees up more time to plan and anticipate commercial campaigns or exceptional price changes. Beyond communication between pricers and other pricing stakeholders, cross-department collaboration—with marketing and merchandising—is also facilitated thanks to the time savings provided by the solution. Since day-to-day tasks run automatically, teams have greater agility to focus on special operations.
Meet the need to change prices more regularly
Since the COVID period, competitive intensity has increased. Traditional businesses face competition from pure web players. They themselves are implementing omnichannel strategies, which add new layers to their pricing strategies. Inflation also brings the subject of prices to the forefront and impacts consumer purchasing behavior.
All these contextual elements, put together, invite retailers to change their prices more often, including in sectors that were not used to it.
In the DIY world, players change their prices 3 or 4 times a year. Now, they have to do it once or several times a month. It is therefore much more comfortable and secure to automate these price changes based on simple rules for aligning or changing purchasing conditions.
The same goes for the garden/pet center sector. Previously, brands changed their prices twice a year. But the arrival of discounters on their market, online sales, and competition from GSAs are forcing them to be much more active on pricing.
The pharmaceutical sector is also evolving on this subject, with players seeing pricing as a real strategic lever.
Conduct a more granular pricing strategy
Automation helps make price calculation more reliable. It simplifies the daily life of the teams involved in pricing.
Depending on your level of maturity, it can also help you implement a more refined and ambitious pricing strategy.
When you automate, pricing is no longer a problem. When initializing, you can therefore adopt a more granular approach by integrating a multitude of rules and factors into your strategy.
For example, you can add influence factors you consider relevant, apply sales forecasts, or perform demand elasticity calculations. This allows you to go further in your strategy, knowing that you won’t have to redo the calculations each time and that processing times will be reduced through automation.
Even if your need to integrate new variables is not immediate, automation makes it easier to add new datasets later in the project. As you mature, you will be able to push the limits of your pricing strategy.
Automation also helps you gain competitiveness, even against competitors that are difficult to track, especially in an omnichannel context. With the right input data and well-defined alignment rules, you can optimize your prices to maintain a competitive edge.
However, to make pricing a sustainable competitive advantage, automation is not everything. You must also take into account the sensitivities of your customers. The rules you set are not set in stone. You also need to understand them well, see the results and be able to evolve your pricing strategy over time while maintaining control.
The limit of automation lies in the “black box effect”. This is why our Optimix XPA solution provides a report on the calculation rules which led to a price calculation. At any time, you can see how the price was calculated and, if necessary, you can readjust the strategy by modifying a rule that does not seem (or no longer) suitable to you.
Automate your pricing without losing control — it’s possible.
Automating pricing has several advantages: reliability, operational efficiency, responsiveness, etc.
However, to bear fruit and meet your objectives, it is important that automation is fully mastered.
Automating doesn’t mean you have to delegate everything to your solution. The solution frees you from the most time-consuming tasks, but strategy remains the prerogative of pricing teams. It is always the pricers who set the rules and see the results. They provide verification mechanisms to ensure the validity of the strategy.
The teams that perform well in pricing are those that know how to find the right balance between automation and human expertise. It is with this in mind that we designed our pricing solution, with control mechanisms, blocks and alerts to allow you to take control when necessary.
Do you want to automate your price calculation while maintaining control over your strategy? Contact us to discuss your project.
